Tuesday, December 06, 2011

Kofax Acquires BPM ISV

Kofax has finally pulled the trigger on its much anticipated acquisition of a BPM software provider. However, instead of being the SharePoint-focused ISV many of us thought it would be, it as Northern Ireland-based Singularity. Singularity, which does its business primarily in the U.K. reportedly did  $16 million in revenue for its fiscal year ended Sept. 30, with an adjusted EBITA of $1 million.

The reported acquisition price was a maximum of $48.1 million, with $30.3 million being paid up front. In a conference call with analysts, Kofax CEO Reynolds Bish, said his company should end up paying approximately 2.9 times annual revenue for Singularity, which he said compares with the multiples that Open Text paid Metastorm and Global 360 and Lexmark paid for Pallas Athena.

Bish discussed four main drivers behind the acquisition:
1.  the opportunity to extend the offerings of Kofax's global sales force--expanding the geographical markets for Singularity.
2. the natural integration of capture and BPM for automating processes,
3. the lower total cost of ownership for customers working with a single platform for both technologies,
4. and the tight integration that can be achieved going forward.

Basically, as more ECM vendors are getting deeper into capture with their own products, either through acquisitions, development or both, capture ISVs like Kofax are being pushed to expand into ECM - and with BPM, in my opinion, the highest value area in an ECM suite (along with capture of course), it makes perfect sense for Kofax to acquire a BPM player.

There will certainly be some challenges related to integration, not necessarily of technology, but of sales and marketing - but overcoming these challenges should help Kofax continue to grow and be profitable in the future. Much more on this in our upcoming premium issues.

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